Days of Conference Past: Homeowners’ Edition

In every April General Conference, we hear the Statistical Report for the prior year. Roughly speaking, the Statistical Report tells us the number of church units, the number of members and baptisms, the number of missionaries, and the number of temples.

And reading a Statistical Report in conference has at least a century of precedent. I’ve been skimming through a number of early-20th-century April Conference Reports, and in April 1915, Pres. Joseph F. Smith read a statistical report in his opening remarks. [fn1]

That century-old statistical report is similar to, albeit slightly more detailed than, the ones we hear today: Pres. Smith reported on, among other things, the birth and death rates of the church, the number of missionaries serving (1,431), the number of church units, and the number of temple ordinances performed.

One thing leapt out at me though: Pres. Smith reported that 73% of Mormon families owned their own homes.

A little later in the same address, he provided some editorial commentary on Mormon homeownership:

Now, we have a few more statements that I desire to read: Our records show that 73% of all the Latter-day Saint families, residing in all the stakes of Zion, own their own homes. I am sorry that this figure is not as large as it has been in the past, but we have become more numerous than we were when 95% of the people of the Church owned their own little homes and owed nothing to anybody for them.

Three years later, Pres. Smith read, as part of the statistical report, that the Mormon homeownership rate had increased by seven percentage points: in 1918, 80% of Mormon families owned their own homes.

A Warning Against Mortgages

As important as homeownership seems to have been,[fn2] it was not an absolute good. In October 1916, President Smith began his remarks thus:

I have just one little short sermon: Get out of debt, keep out of debt; never mortgage your homes nor your farms.

In the April 1915 talk linked to above, he went into a little more depth:

Let me inject here, once more, my standing admonition to the Latter-day Saints: My brethren, see to it that you do not put a mortgage upon the roof that covers the heads of your wives and your children. Don’t do it. Don’t plaster your farms with mortgages, because it is from your farms that you reap your food, and the means to provide your raiment and your other necessaries of life. Keep your possessions free from debt. Get out of debt as fast as you can, and keep out of debt, for that is the way in which the promise of God will be fulfilled to the people of His Church, tht they will become the richest of all people in the world. But this will not happen while you mortgage your homes and your farms, or run into debt beyond your ability to meet your obligations; and thus, perhaps, your name and credit be dishonored because you over-reached yourselves. “Never reach farther than you can gather,” is a good motto.

So what’s up with his antipathy toward mortgages?

As we read him, it’s probably important to note that mortgages in 1915 are pretty foreign to mortgages as we think of them today. The 30-year fixed-rate mortgage that is tokay’s default product was not introduced until after the Great Depression. In Pres. Smith’s day, residential mortgages generally had terms between five and ten years. Rather than amortizing, like plain-vanilla mortgages today do, pre-Great Depression mortgages were structured as bullet loans, with the full principal due at the end of the term. During the life of the loan, moreover, most loans featured a floating interest rate.

Although loans were smaller—generally less than 50% of the value of the residential property—if a borrower couldn’t come up with the principal or refinance at the end of the term, they would have to sell their property (or, I assume, risk foreclosure).

Which is to say, I don’t think that Pres. Smith’s specific condemnation of mortgages carries any moral weight today in the U.S. It’s virtually impossible today to buy a house without borrowing, and the terms and protections have changed.

That said, it’s probably worth taking seriously his recommendation that we not stretch ourselves beyond our ability and that, when we borrow, we do so carefully, and that we calculate what we can afford to buy realistically.

But mostly, I think it’s interesting that the church announced, in Conference, homeownership rates.

[fn1] The history of statistical reports may go further back than 1915; I started my research there, though.

[fn2] And it seems, rhetorically at least, to have been important. In October 1911, Elder Joseph R. Shepherd, the president of Bear Lake Stake, spoke about how we can recognize the goodness of the Saints from their fruits. Among the fruits? “I presume that you will find no larger percentage of people who own their own homes, or who are independent so far as means are concerned, than among the Latter-day Saints.”

Comments

  1. I would not say it carries no moral weight today. Everyone should have a plan for paying off their mortgage in a reasonable time. We should not live in so fancy a house that we will forever be in debt, nor should we constantly upgrade our house to carry the maximum debt our income will bear. When times turn hard as they did in 2008, those who have been more conservative in their debt were in better positions to weather the problems. Many, many people in my ward lost their homes during that time, some under tragic conditions.
    Now let me say I do not attach a moral wrong, as I have heard some in the church do, to having a house foreclosed or sold short. The loans have been structured such that the banks know their risk and the decision to keep a home or go through default is a business decision not a moral evaluation. I know the Church released several statements to this effect during the recession. To evaluate mortgages as a moral issue would place a standard on individuals that we do not apply to businesses, which regularly allow any property to foreclose if it no longer appears likely to be profitable. Claiming it is immoral to default on a home loan would suggest that it is somehow easier to be moral if you are also very rich. Some have likened it to breaking your word, but this is not so. Your word was given in a complex legal document and tempered by the laws of the state. The circumstance of non payment was included and the penalties affixed. By paying those penalties you have fulfilled your word. I think it is more reasonable to suggest bankers consider the moral implications of turning a family out of their home under any circumstance.
    I also want to say that the church later trended to suggesting that the two items that were reasonable for debt were a home and an education. I don’t have a reference for this. It would be interesting to follow the evolution of prophetic counsel on debt.

  2. I’ve also heard of the “go into debt only for a home and an education” advice. But I’m not sure that’s advice most members follow–and I’m not sure how authoritative it is. I think most members in the U.S., for example, also go into debt in order to buy vehicles.

  3. I wonder if the prophetic counsel against mortgages included a repeal of the Utah property tax. So long as there is a property tax on homes in place, homeowners never really “own” their homes, but essentially rent them from the state/county b/c failure to pay property taxes may lead to losing a home despite the fact the homeowner may not have a bank or financial institution mortgage.

    This isn’t meant as a screed against property taxes (where I live we have excellent public schools underwritten by high property taxes) but if the goal is to be an “independent” homeowner, then property taxes are another type of mortgage a homeowner must pay and undermine the claim that despite the absence of a mortgage, a homeowner independently owns a home.

  4. Gilgamesh, I totally agree that we shouldn’t buy extravagant homes that we can’t afford and lever ourselves to the gills to do so. And, in fact, I say as much in the OP.

    That said, that wasn’t Pres. Smith’s explicit exhortation: he said, Don’t get a mortgage. Full stop.

    And that advice doesn’t, it seems to me, have any purchase in today’s US housing market, where it is virtually impossible to buy a house without a mortgage. Especially if we value homeownership (which, in fairness, just like nobody has said don’t get a mortgage recently, nobody has laid out the percentage of members who own their own homes, either).

  5. Current advice on debt is summed up in the All is Safely Gathered in pamphlet put out by the church:

    “Spending less money than you make is essential to
    your financial security. Avoid debt, with the exception
    of buying a modest home or paying for education or
    other vital needs. Save money to purchase what you
    need. If you are in debt, pay it off as quickly as possible.”

    I think parts of it are widely ignored including the “modest home” bit, the “vital needs bit” and the last part which is to pay off debt as quickly as possible which means all debt including mortgage debt.

  6. I saw an old list of temple recommend questions (I think from the 1920’s or older?) at a museum on BYU (Provo) campus – one of the questions asked “Are you in debt?” or “Do you owe anyone money?” (I can’t remember the exact wording). I thought it was fascinating that it tied debt to temple worthiness – or maybe it’s fascinating that that has changed.

  7. The Other Clark says:

    At one point, Church policy insisted that members NOT dedicate their home until after they owned it free and clear. (You can’t dedicate it when it really belongs to the bank). This policy was in place up through the late 1970’s, I believe.

    Also, it’s interesting that the statistics are pulled only from “the stakes of Zion.” If you lived outside the Jello Belt, evidently you didn’t qualify as fully Mormon.

  8. No, there just weren’t stakes outside of “the Jello Belt” in the early 1900s.

  9. I disagree with Gilgamesh a bit that a promissory note and mortgage is some complicated thing. As long as you do what you’ve committed to do, it’s very simple. The complications arise when you default. I don’t believe there is “dishonor” in not fulfilling the terms of a note, although the language is “I promise to pay……” Saints are told to keep their promises as best they can, but there are any number of extenuating circumstances that may arise which would prevent one from fully honoring that promise. We shouldn’t judge people one way or another if they find themselves in foreclosure. I do agree with the overall admonition to stay out of and/or get out of debt. I was mostly out of debt by age 40, finished off the house at age 50, and I hope to never be in debt again. The low interest rates of today do make it hard not to sell the house and get something a bit nicer, but I haven’t had a note in 4 years. It’s a shame that car prices have sky rocketed so that young families essentially have to finance home, education and transportation.

  10. Mortgage in this historical context seems to be closer in meaning to a home-equity loan or cash out refi. Something done after purchase, not at time of.

    “At one point, Church policy insisted that members NOT dedicate their home until after they owned it free and clear.”

    Not sure how that’s possible as pretty much all property in the world is really feudal from the State with 1%-10% annual dues, where if not paid will be taken away. Not too different from a mortgage in my view.

  11. comment fail.

    rb already totally nailed my second point.

  12. Yeah, it’s pretty hard to get motivated to pay off my home quicker than required when the interest rate is 3%. The (necessary and no-interest-within-the-first year) business loan and the student loans were easy to pay off quickly because interest rates for those were–at least eventually–significantly higher than inflation. But when the interest rate is basically equal to the rate of inflation, what’s the point in paying off the home before investing in retirement or updating the 1997 Geo to a 2010?

  13. We have to remember things like the Homestead Act – you paid a filing fee of about $18 and could claim land, sometimes up to 1500 acres. With a large family, children could stake out more land in the vicinity as they came up age, and a family could have a pretty darn large estate after a few generations. Stake out your land, file a claim, make improvements, and it would eventually be yours to will, sell, or use. I suspect mortgages were much more rare way back when – the attitude was with a few years of hard work, you could start with a sod dugout and generally move your way up to the brick house with the picket fence. A mortgage was a means to skip several years of sod dugout and single-mule cultivation.

    I spent twelve years working in a mortgage bank. Long ago, the rule of thumb was you could reasonably afford a home two and a half times your income. When I bought a home, I tried hard to stay at 1.5 times my income, and I’ve never had a mortgage term longer than 15 years. Prior to 2008, the bank I was at wouldn’t think twice about making a loan for 8 times income – they figured the worst-case scenario was that if the borrower defaulted, we could take possession and sell it for far more than value on the note anyway. NINJA loans (No Income, No Job or Assets) were common as well – we saw loans go out at 4 times the annual disability payments.

  14. Geoff - Aus says:

    It also makes sense, in a country where there is a shortage of housing, to invest in residential property. Bad borrowing is where you have to pay it back and the thing you bought decreases in value.
    Acceptable borrowing is where you pay it back but the thing you bought increases in value.
    Good borrowing is where someone else pays it back and the thing you bought increases in value.

    So if you had $3.5million in property and debt of $1,25m and the tenants paid the interest on the debt, and the asset continued to grow in value you would be in a good debt situation.

    Debt is not always bad, if used wisely it can create wealth. I doubt Romney uses his own money for his business, for the same reason.

  15. Personally, I don’t identify Romney and Bain Capital with Chris like living. Then again, I don’t think any single family or person needs $3.5 million either.

    I would rather give the coat off my vacation, than be in danger of passing by the “least of these,” or worse, raiding their pension funds. I like my soul and relationships with my Heavenly Parents way more than I like making money off the misfortunes of others.